“Rule of Law” is both a play on my name, and a statement of my values. The rule of law is a foundation for both our liberties and for order. The rule of law respects us as equals. It allows us to organize our lives, plan our futures, and resolve disputes in a rational way. There are those around the world and throughout history who have fought in great struggles for the rule of law. My role is more modest. I am a lawyer at the law firm of Sabey Rule LLP who works with people, assisting them with estate planning, probate and estate administration. I also assist people in resolving disputes about wills and estates. In this blog, I write about some of the legal topics that I deal with in my law practice, and about other legal issues that interest me. In doing so, I hope that I help others learn more about law, and that I encourage discussion about law and law reform. I hope that, in some small way, I help nurture the rule of law. You may contact me at my office at #201 - 401 Glenmore Rd., Kelowna, B.C., Canada; V1V 1Z6; telephone number: (250) 762-6111; email: s.rule@sabeyrule.ca.

Blog Archive

Saturday, June 15, 2013

When is a Gift Not a Gift?

Law can be subtle. The same word can mean different things
in different contexts.

The National Foundation for Christian Leadership (“NFCL”) is
a registered as a charity in Canada
that provides bursaries and scholarships to students in Christian universities.
Those who made donations received charitable tax receipts, which they could
use—or as it turned out, in some cases, thought they could use—to obtain
charitable tax credits.

Parents or other family members or friends of students
attending Christian universities provided donations. Donors could not direct
that their donations be used to fund a bursary or scholarship for a specific
student, but as found set out by the Federal Court of Appeal in Coleman v. HerMajesty the Queen,

[3]
Under the program
administered by NFCL, nearly all students who solicited “donations” received
bursaries for the expenses related to their education at TWU or at other
Christian post-secondary institutions in an amount equal to approximately 80%
of the lesser of students’ eligible expenses and the funds that they had
solicited. Some students were awarded scholarships equal to 100% of the lesser
of their eligible expenses and the “donations” to NFCL that they had solicited.
The value of a student’s bursary or scholarship could not exceed the amount of
the solicited “donations”.

[4]
Although a “donation” could not be earmarked by a “donor” for a
particular student, the Judge found on the basis of NFCL’s pamphlets that the Appellants
either knew or ought to have known that, if they made a “donation” to NFCL,
their children and grandchild would receive a bursary or scholarship that would
defray the expenses of their education at TWU.

The Federal Court of Appeal, upheld the Tax Court of
Canada’s decision that a number of these donations charitable tax credits for
which the Minister of National Revenue had disallowed were not “gifts.” For the
purpose of qualifying for a charitable tax credit, a “gift” is “is a gratuitous
transfer of property owned by the donor in return for which no benefit flows to
the donor.”

Justice Campbell Miller, in the Tax Court of
Canada, found that the donations were not truly gratuitous transfers with no
benefits flowing to the donors. Although the donors could not directly control how
their funds were used, there was a strong correlation between the donations and
receipt by those students who solicited the donations. Parents donating funds
knew that their children would receive bursaries or scholarships because of the
donations. Justice Miller found that if the children had not received financial
support from NFCL, the parents would have otherwise paid those amounts.

Ken and Monica Neville had donated $6250 to NFCL. They
received a tax receipt. Their daughter, who attended TrinityWesternUniversity, received
$6408 in scholarships from NFCL.

After they were denied charitable tax credits for their
donations, they sued NFCL, seeking a return of the funds they donated.

Britton, in his treatise of gifts (Lib. 11. C3) gives the
following definition:

“A gift is an act whereby anything is voluntarily
transferred from the true possessor to another person, with the full intention
that the thing shall not return to the donor, and with full intention on the
part of the receiver to retain the thing entirely as his own without restoring
it to the giver. For the gift cannot be properly made if the thing given does
not so belong to the receiver, that the two rights, of property and of
possession, are united in his person, so that the gift cannot be revoked by the
donor, or made void by another, in whom the lawful property is vested.”

In the leading case of Cochrane v. Moore (1890), 25 Q.B.D. 57, at p. 76, Lord
Esher M.R., gives the definition of a gift as follows:

“It is a transaction consisting of two contemporaneous acts,
which at once complete the transaction, so that there is nothing more to be
done by either party. The act done by one is that he gives; the act done by the
other is that he accepts. These contemporaneous acts being done, neither party
has anything more to do.”

The essential elements of a gift then, according to these
definitions, are that one gives, that there is delivery of the gift and that
the person to whom the gift has been made accepts.

[26] There
is really no doubt based on the evidence adduced before me that the donations
were gifts in the sense that “there is a delivery of the gift and ... the
person to whom the gift has been made accepts”. I do not understand
either party to contest that proposition.

Mr. and Mrs. Neville argued that because they did not get
tax credits, the purpose of their donations was not fulfilled, thereby vitiating
their gifts. Associate Chief Justice Cullen did not agree. The purpose of the
gifts was to fund scholarships and bursaries, and NFCL carried this out. The
charity did what the donors contemplated. The donors may have been motivated by
their desire for tax credits, but that was not the purpose of the donations.
The tax authority’s treatment of the donations does not vitiate the gifts.

Nor did Chief Justice Cullen accept Mr. and Mrs. Neville’s
submission that the donations were conditional upon their receipt of tax
credits. There was no evidence that at the time they made the donations that
they attached any conditions. Once they made an absolute gift, they cannot then
attach trust conditions to it.

In the result, NFCL is entitled to keep the donations they
received from Mr. and Mrs. Neville. Although the donations made by Mr. and Mrs.
Neville were not “gifts” in the sense that they did not receive any benefit in
returned, as required to qualify for charitable tax credits, they were “gifts”
at common law in the sense that they were transfers of property that the
recipient is entitled to keep.

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Rule of Law web-log is intended for general educational purposes only, and you may not rely on its contents for legal advice. Please keep in mind that the laws of British Columbia are often different from the laws of other Provinces of Canada, States of the United States of America, and other countries. Furthermore, the law changes, and what was once an accurate statement of the law, may now be outdated and inaccurate. If you have a specific legal problem or issue, please consult a lawyer who is familiar with the laws of your province, state or country. Neither reading this blog, nor sending me an unsolicited email will create a solicitor and client relationship with me.